Question 1

Paul is willing to pay $$200 for a new tennis racquet but buys one on sale for 125. $$What is Paul's consumer surplus from the purchase?

Accepted Answer

$75

Question 2

Consumers are willing to purchase a product up to the point where:

Accepted Answer

the marginal benefit of consuming a product is equal to its price.

Question 3

Refer to the following willingness to pay for a theater ticket: Anya $$24, Basil 20$$, Celeste $$15, Dralon 12$$, Esther $$7. If the price of one ticket is 18$$, what is the total consumer surplus for those who buy tickets?

Accepted Answer

Basil will receive $2 of consumer surplus from buying one ticket.

Question 4

The area above the market supply curve and below the market price is equal to the total amount of producer surplus in a market. Which area on a supply and demand graph does this describe?

Accepted Answer

above; below

Question 5

Refer to Figure 1. What area represents producer surplus at a price of $$P_1$$?

Accepted Answer

$$C$$

Question 6

Refer to Figure 2 (cigarette market with tax). What is the size of the per-unit tax?

Accepted Answer

$$5$$

Question 7

If demand is inelastic, the absolute value of the price elasticity of demand is:

Accepted Answer

less than one.

Question 8

The price elasticity of demand for Stork ice cream is $$-4. If $$quantity demanded fell by $$10\%$$, what was the percentage change in price?

Accepted Answer

$$2.5\%$$

Question 9

Which of the following is the best example of a good with perfectly inelastic demand?

Accepted Answer

a diabetic's demand for insulin

Question 10

Suppose at the going wage rate of $$20$$ per hour, firms can hire as many hours of janitorial services as they desire. If any firm tries to lower the wage rate to $$19$$, it will not be able to hire any janitor. What does this indicate about the supply curve for janitorial services?

Accepted Answer

Supply is perfectly elastic.

Question 11

A characteristic of the long run in production is:

Accepted Answer

all inputs can be varied.

Question 12

Economic costs of production differ from accounting costs in that:

Accepted Answer

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Question 13

The law of diminishing marginal returns states:

Accepted Answer

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

Question 14

Refer to Figure 3 (Total Product curve). What is the marginal product of the 3rd worker?

Accepted Answer

$$15$$

Question 15

Refer to Figure 3. What is the average product of the 4th worker?

Accepted Answer

$$17$$

Question 16

Over the past twenty years, the number of small family farms has fallen significantly and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?

Accepted Answer

economies of scale in farming

Question 17

A negative externality exists if:

Accepted Answer

the marginal social cost of producing a good or service exceeds the private cost.

Question 18

Which of the following is an example of a positive externality?

Accepted Answer

planting trees along a sidewalk which add beauty and create shade

Question 19

Refer to Figure 4 (externality graph). What is the efficient output level?

Accepted Answer

$$Q_a$$

Question 20

Refer to Figure 4. The deadweight loss due to the externality is represented by the area:

Accepted Answer

$$abf$$

Microeconomics Midterm Study Guidance: Surplus, Elasticity, Tax, Production, and Externalities

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